What Causes Poverty

Greetings and welcome! Today we are going to learn a little bit about poverty. We’ll start our discussion of poverty by looking at some of the facts about poverty. First of all, we have to understand that poverty is a serious individual and social problem. The fact is, you do not want to be cash poor on this world because being poor is a bad thing. It’s remarkable, and possibly hard to believe for some, but there is nothing salutatory about poverty. Poverty causes nothing but hardship and struggle for the people. Children who grow up in poverty have poor health, poor hygiene, poor diet, poor housing, lousy experiences at school (as evinced by higher absenteeism and lower scholastic achievement), more behavioural and mental problems, and long term employment difficulties (Silver, 2012). Adults who are poor have the same difficulties as their children, getting sicker more often, being unemployed for longer periods, taking more time off work, living shorter lives, and so on (Silver, 2012). There is no doubt about it, being poor is a liability: it causes disability, disease, and even death.

Why do the poor have such problems with life? There are lots of different reasons for that. One reason is that lack of money means inability to buy healthy food. As anybody who has ever looked at the organic section of a supermarket knows, it costs money to eat healthy. If you do not have money to buy healthy and nutritious foods, you have to buy cheap and processed foods. Beyond a mere consideration of cash, time is also an issue. It takes time to eat healthy, exercise, and stay healthy. A person who is poor, for example a single parent mother of two children who has to work two or three low paying, benefit-less jobs to make ends meet, does not have time to cook healthy meals. It takes a good hour to make a healthy meal (not including the time to shop and clean up), but you can throw together a pasta with sugary, salty, canned sauce in about ten minutes.

Another reason why the poor aren’t as healthy as the rich is stress. As modern medical science is more and more becoming aware of, stress harms the physical body (the physical unit as I would say). Unfortunately for the poor, the poor always live under conditions of high stress. Worrying about bills and rent causes stress, that’s for sure, but it is worse than even that. The poor often live in neighbourhoods where there is violence, go to overcrowded schools where they are bullied and neglected, and put up with forms of racism, classicism, and sexism that undermines their well being and cause chronic levels of anguish. There is no doubt about it, it is not fun being poor on this planet.

It is hardly arguable that being poor is a liability for the poor. It hurts adults, it hurts kids, and it lowers one’s quality of life. When we hear these facts the question always arises in our minds, “Why do poor people exist?” The common answer that usually arises in response to that question is that the poor are there because of something they did. Most people would think that the poor are uneducated, lazy, or flawed in some way. Most would think that the poor simply can’t compete, or that they lack in talent and strength. It’s tempting to think this way, especially if you have no sociological background. However, thinking that the poor are poor because of something they did is absurd. There is no logic or common sense to it. For example, and at the most obvious level, people are born poor. People are born into poor families, in poor ghettos, in poor communities, and in poor countries and thus become poor simply by virtue of being born into a special social class or demographic category. And once you’re born poor into poverty, it is hard to get out. There is what we sociologists call the Burden of Poverty. The burden of poverty is a set of interrelated problems, like high stress, racism, classism, addiction, depression, violence, and even poor cognitive functioning caused by stress (Haushofer & Fehr, 2014; Mani, Mullainathan, Shafir, & Zhao, 2013), that makes it difficult for individuals to get out of the hole they are born into. The burden the poor face is heavy, like a ton of rocks weighing them down.

It is obviously absurd to blame individuals born in poverty for their poverty, but even people who become poor during the course of their lives cannot be blamed. Evidence of this comes from the fact that the number of people who experience poverty changes over time, and also from the fact that countries around the globe have wildly different rates of poverty. Consider North America, for example. The number of people experiencing poverty has changed in the past twenty years. In the last twenty years we’ve seen soaring corporate profits, ballooning CEO salaries, and a growing reliance on food banks (food bank use has doubled in Canada since 1989). In the past two decades the wealth gap between the rich and poor has been growing wider and wider, especially in the U.S.A and Canada. This growing gap has prompted Warren Buffet, one of the richest men on the plant, to suggest that the rich were winning the “class war” (Stein, 2006). The gap has also prompted Piketty (2014) to call our current age the new gilded age. Unless you want to make the argument that more and more people are becoming lazy and stupid over time, blaming the individual is not a sensible position. The rich are getting richer and the poor are growing in numbers (and getting poorer) because something else besides individual laziness or failure is going on.

The fact that the poor don’t cause their poverty should be driven home by considering that poverty rates differ by country, even when those countries are highly developed and industrialized. If you live in Finland or the Netherlands, for example, you are much less likely to be poor than if you live in Canada or the USA (Fisher, 2013). Once again, unless you want to argue that your fellow Canadian citizens are lazier than your Finish or Nordic compatriot’s, something that would be clearly absurd, you just can’t blame the individual for their experience of poverty.

If you can’t trace poverty to human laziness or individual failings, where can you trace it? At the most abstract level you can blame poverty on human action, or inaction as the case may be. As the text points out (Silver, 2012), the single biggest predictor of poverty is lack of available work. That is, it is the lack of work, or the absence of well-paid work, that causes poverty. When people don’t have jobs, when the jobs people have don’t pay them enough, then you get poverty. There are in fact very few cases where mental illness, physical disability, or other individual factors prevent people from being productive members of society.

So if lack of work is the cause of poverty, what causes lack of work? Again, that’s human action. For example, if the Ford motor company closes down a factory in North America and moves its jobs to a developing nation where they can pay the workers less, it is the Ford motor company, or rather the executive management of the Ford motor company, that causes the unemployment. You can find all sorts of excuses and justifications for moving the factory, for example lower wages in another country, better tax conditions, etc. But all the excuses in the world won’t change the fact that it’s an action, in this case the action of a board of executive officers, that causes the unemployment. And note, it is not just the actions of a corporation that can cause unemployment. As McNally (2012) notes, in 2008-9 neo-conservative governments around the world paid out over $20 trillion taxpayer dollars to bail out privately owned banks that had succumbed to the “global economic crises” of 2008. Bailing out banks drains public coffers and, in a complicated web of cause and effect, forces governments to take actions that increase unemployment (McNally, 2012). Of course at this point you know, government actions that increase unemployment, increase poverty.

The bank bailout wasn’t the only thing that happened during the crises that caused an increase in poverty in 2008 and beyond, but by the end of it the World Bank itself estimated that “an additional 64 million people were driven into poverty in 2010 alone” (McNally, 2012, p. 127). And if that number doesn’t cause you a bit of shock, horror, indigestion and maybe even some shame and guilt, you’re not paying close enough attention. Sixty four million is a big number, and poverty is a horrible, awful experience. Poverty is so awful in fact that in the ten or so seconds it is going to take you to read this sentence, two children will die because their parents are too poor to afford the basic necessities of life (Shah, 2011). Two more are going to die as you take the time to digest this fact. And all of that death caused by somebody’s human actions.

Saying that unemployment is caused by the actions of corporations and governments, while technically correct, doesn’t really explain much. Humans are basically born good, and no good person is going to want to make a decision that causes 64 million people to die the slow and horrible death of poverty? So why do they do it? Why does a car company abandon an entire community, and why do governments legislate policies that cause unemployment? Well, that comes down to the pathological desire to accumulate. As I point out in Rocket Scientists Guide to Money and the Economy (Sharp, 2013), ever since money has become the medium for exchanging labour, accumulating labour (a.k.a. Making money, turning a profit, etc.) has become the primary goal of life, and the only God that many people follow. As the former CEO of U.S. Steel famously said, “U.S. Steel is in the business to make profits (i.e. accumulate labour), not to make steel” (McNally, 2012, p. 129: parenthetical expression added). On this world, nothing else is more important, to a few. If Ford can move its factory to another country, and if that country’s government allows them to pay workers less, Ford will move because its goal is to make money, not to make cars, or even employee people. Similarly, Governments take action, impose austerity measures, open up free trade agreements, all to ensure ongoing accumulation, and all these things affect the availability of jobs, and consequently the depth and breadth of poverty. Thus, it is not lack of ingenuity, laziness, or bad luck that causes poverty, it is the pursuit and worship of accumulation that causes poverty.

Of course, saying that our worship of accumulation is behind the actions that create unemployment does not explain how corporations or governments that support accumulation create poverty—and the how of it is quite fascinating. Usury (i.e. lending money at high interest) is a primary mechanism of accumulation. Governments can also institute economic policy that supports accumulation. For example, lowering taxes on corporations and raising them on the middle class, draw cash from the middle and concentrate it at the top. Governments can also impose “austerity” on the poorer people, disadvantaging them by cutting social and economic programs designed to benefit the lower tiers of society (Silver, 2012). And of course, Capitalism itself is an economic system premised on accumulation. The goal of capitalism, the goal of capitalists (as the CEO of U.S. Steel said), is to accumulate capital (i.e. money). That’s what they do. They make a product, sell it for more labour than it is technically worth (Sharp, 2013) (i.e. as much profit as they can get (profit being just a euphemism for accumulation), and go to their graves rich and satisfied.

If you ask me, most of the problems on this Earth are caused by unfettered accumulation. The blind pursuit of accumulation/profit über alles is undermining the social, political, economic, and even natural environment of this planet. We could spend a lot of time focusing on all the pain and hardship, poverty, environmental degradation, biosphere contamination, suffering, and despair caused by unfettered accumulation, but what I want to focus your attention on before closing this commentary is the crises that inevitably occurs when accumulation is the organizing goal of our economic, political and social lives. As I argue in the Rocket Scientists’’ Guide to Money and the Economy, unfettered accumulation, the kind of accumulation that the .01 percent prefer, inevitably leads to depressed wages, economic starvation, recession, depression, global crises, ideology, hardship, and perpetual war (à la Orwell’s 1984). Put another way, accumulation damages the economy, life, and the Earth. The process is caused by the way accumulation drives production to insane levels while it gradually starves the economy of its very life blood, money (Sharp, 2013). It is a truism that the rich just get richer, and as they do the economy and (as we all can see) the planet slowly dies.

The process has been going on since the great depression (which was itself caused by unfettered accumulation) and although there are lots of “stop gap” measures that the PTB can take, like for example creating debt, government spending, or imposing austerity measures, the crises inevitably deepens (i.e. get worse) an accelerates (i.e. come faster and faster). The inevitable result is a total and uncontrollable economic collapse that not even the rich and powerful can stop. It hasn’t happened yet, but it is getting closer and closer. In fact in 2008 the planet came pretty close to global economic meltdown. Just how bad the previous global financial crises was is clearly demonstrated by the response of the über rich who were, by their own account “shocked” and “scared” by their lack of control over the situation.

U.S. Treasury Secretary Hank Paulson confided to his wife on September 14, 2008 “I am really scared”. Small wonder: that day the century-old Lehman Brothers investment bank was disintegrating, sending shockwaves through global credit markets. Lehman officially collapsed the next day, followed twenty-four hours later, by AIG, the world’s largest insurance company. Before the month was out Washington Mutual would melt down, registering the biggest bank failure in U.S. history. Then America’s fourth largest bank, Wachovia, went on life support. A wave of European bank collapses rapidly followed (McNally, 2012, p. 127).

Of course, if you’re a junky of the main stream media, you may be forgiven for thinking that the big crises has been averted and its business as usual once again, but you’d be wrong. Even a single measure of economic hardship like the number of homeless children in the US, which in 2011 was at its highest rate since 1983 (“Homeless children at record high in US. Can the trend be reversed?,” 2011), tells a different story. The strongest statement of impending global catastrophe is the growing concentration of wealth, and the increasingly stark and obvious crises that even developed countries like Greece are starting to go through. As Dr. Singh (2015) points out:

The top 1% will soon own more than 50% of the world’s wealth.

The top 1% are accumulating all the wealth. And that is a problem. Accumulation is sucking the global economy dry and no amount of debt expansion, wealth, generation, or austerity imposition is going to solve the problem. And since nothing has really changed since 2008, we can expect things to get worse, at least for the majority. The über rich will do just fine. Indeed, despite a little blip in their fortunes, the rich are doing “very well”. In the year following the recession (2010), and according to the Sunday Times Rich List survey, “the collective wealth of Britain’s 1,000 most affluent people rose by 30 per cent…the largest in the poll’s 22-year history” (“The rich get even richer,” 2010). But if accumulation continues unchecked, everybody else is not going to do so fine. If nothing changes then accumulation may eventually lead to increasingly catastrophic economic collapse, and increasingly pervasive hardship (64 million new poor people is really just a drop in the bucket). At the point where economic collapse becomes global, volatility and violence in the form of food riots (or worse) becomes increasingly likely (McNally, 2012). In some places in the world it could look a lot like the French Revolution, with the poor banging their plough shares into swords, and the rich using their access to the police and military apparatus in their own, and other countries, to subvert protests and put down protestors. At the point of total economic collapse the only thing that the über rich are going to be able to do, outside of ending their regime of accumulation, is institute increasingly violent global violence and conflict in an attempt to put down growing resistance. Global war will solve the problem of a revolutionary global population and ensure ongoing accumulation even in the face of global poverty and hardship, as it always has done, by pitting our children against each other, but it won’t solve the crises. It will just institute chronic, permanent war. And I say that with tongue in cheek as if we don’t already have that. WWII helped end the great depression, but perpetual war ever since has kept the economy limping along and the anger misdirected. If it’s not communist Russia it’s evil Korea. If it’s not evil Korea, it’s scary Vietnam. If it’s not Vietnam its Iraq. If not Iraq, Al Qaeda, if not Al Qaeda, Isis. The song, as the mystical magical Zeppelin once said, remains the same.

So what is there to do? Are we forever condemned to suffer deepening economic crises while accumulation continues unfettered? Maybe. It really just depends on the decisions we make. As McNally (2010) notes, sharp class lines have been drawn. “Every U.S. governor proposing to cut Medicare, public school-funding, and pensions as well as curtail union rights is also pushing through multi-billion dollar tax cuts for corporations and the rich” (McNally, 2012, p. 141). It is not inevitable however. In 2015 a historic election in Alberta, Canada ousted a five decade neo-liberal dynasty. I think most people would have thought “never in a million years”, but the N.D.P party swept to power, instantly changing provincial priorities. The N.D.P are not exactly anti-accumulation, but they are for a more balanced flow of money in the economy. What is most interesting is that the new government swept in on a clarion call for higher corporate taxes! The new government isn’t exactly issuing a revolutionary call to end 10,000 years of accumulation, but it is a start. Even the people in the Western world, even people in locations with long histories of accumulation friendly policies, are beginning to notice that if the world is going to be saved it can no longer be business as usual.

References

Fisher, M. (2013, April 15). How 35 countries compare on child poverty (the U.S. is ranked 34th). The Washingon Post, April 15.

Singh, D. S. (2015, March 6th, 2015). Growing Number of Billionaires and Mass Accumulation of Wealth Exposes the Ugly Face of Capitalism. Link.

Stein, B. (2006). In Class Warfare, Guess Which Class is Winning (Vol. September): New York Times.

Written by Michael S.

Michael S. (Dr. S.) is a scientist, sociologist, author, mystic, and mystical poet whose interests are human psychology, human society, spirituality, consciousness, global pedagogy, and global transformation. He’s busy writing about a dozen books all of which are aimed at enlightening the people and transforming the planet in line with the purpose, and for the benefit of, all. Visit his academic profile or his academia.com website, read some of his scholarly papers, view his video Money Moksha, and read his economically enlightening book, Rocket Scientists’ Guide to Money and the Economy.

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3 Comments

Nicholas R
on July 15, 2015 at 6:41 pm

Dr. Sharpe,

I have recently read your article that your posted on sociology.org about poverty. I found it to be very interesting, and a good read. I will preface this question with the statement that I do believe you are correct. I agree to the notion that the accumulation of wealth in the upper class will inevitably cause an economic crisis once more. However, my question is this:

What should the top 1% do with all of this extra wealth? A few ideas I come to are to either put it back into the businesses, put it toward charitable ventures such as food banks and aid centers, and to distribute it back to the employees in additional compensation.

I do not understand economics perfectly, but should they put it back into the businesses, and attempt to improve either efficiency, or production, they will still only produce to meet demand. Increased efficiency in this production will only result in more money, although could be more friendly to the planet if it is done using green technology. Still this does not avoid the point of wealth accumulating.

Giving to charity is a good way to assist those in poverty, should they be willing to accept it. I don’t know why they wouldn’t, and I don’t know how this assistance could be bad, but I haven’t explored the option much.

Finally, distributing it back to the employees is good temporarily. An increase in spending money will allow the employees to buy more, and will boost the economy for a while. Given that inflation and other economic forces will eventually bring the market back to terms, but the growth will be beneficial for all parties in the short run. I do not know enough on economics to make an educated statement on the future beyond this, so I will refrain from doing so.

These are just some thoughts that I had while reading the article. If any of my statements are wrong or fallacious, please feel free to correct me. I was simply curious as to your thoughts on the topic.Thank you for your time.

Food banks and aid centers are fine, but I’m more of the “teach a man to fish” persuasion, but with some attention paid to the need for healing and education. Just off the top of my head…

I think number one the money should be used to educate the planet, heal the population. There’s a lot of damage that has been done to people as they have been forced into the system, and a lot of stupid ideas that have been implanted as a result of the ideological drive to justify and excuse accumulation. I think free post-secondary education to everybody on the planet, and not the cheep MOOC kind, but real education, with science, engineering, and required liberal arts classes for all (with a specific emphasis on Sociology), would be an important thing to do with that money. Also, money to develop healing centers where people can be treated for the depression, addiction, and other physical and psychological trauma they have endured as a result of the ideological tripe they have been fed is necessary as well.
Number two, fund innovation. There’s lots of people out there with great ideas who need money to get them working. The problem now is a lot of innovation is squelched because it doesn’t fit into the rubric of the current financial titans (oil, auto, arms, etc.), or it is not strictly profitable. Make entrepreneurs out of people! Fund small business, and not just the uber profitable kind. Don’t make people workers. Give them what they need to be independent, responsible, high functioning contributors (some people need a lot of healing to get there though). And widen what we see as useful. Right now the only thing that gets funded are products likely to generate stellar returns. We need to fund social entrepreneurs, people who are involved in educate, or healing, or etc.
Number three, give a social wage. That is, pay people to do useful things for the community, and for business. For example, parents who stay home to raise kids should be given a social wage. They are raising the next generation of workers after all. I run a therapy practice and if the government would fund that practice I could give away healing services to people who need them. I could also train others to do same.

Number four, forgive all debt, at all levels. If you’ve read the book (Rocket Scientists’ Guide to Money and the Economy) you know that debt is a) a way to stave off economic collapse caused by accumulation and b) another means of accumulation. Forgive debt and end usury. This will make it easier for people to start business, and do all the good things they want to do.

I think the key here is to recognize there are 7 billion people on this planet, a large percentage of whom are basically out of work, or only working in slave conditions. Giving them the money they need to get started and insert themselves into the economy, and then ensuring that the economy does not get sucked dry by accumulation, is what we should be aiming for. That’s basically what the rich should do with the money. Make reparations, end regimes of accumulation, fix the damage they’d done, and insert money back into the economy so that people can find their niches, do what they want, and live their lives for their own good, and for the common good of all.

These are just some ideas off the top of my head. Lots more need to be said, and a big part of this is clearing out ideology that supports what I would call The System. But this is a start.